Chapter 5
Elasticity and Its Application
TRUE/FALSE
1. Elasticity measures how responsive quantity is to changes in price.
ANS: T DIF: 1 REF: 5-0 NAT: Analytic
LOC: Elasticity TOP: Price elasticity of demand MSC: Definitional
2. Measures of elasticity enhance our ability to study the magnitudes of changes.
ANS: T DIF: 1 REF: 5-0 NAT: Analytic
LOC: Elasticity TOP: Price elasticity of demand MSC: Definitional
3. The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.
ANS: F DIF: 2 REF: 5-1 NAT: Analytic
LOC: Elasticity TOP: Price elasticity of demand MSC: Interpretive
4. In general, demand curves for necessities tend to be price elastic.
ANS: F DIF: 1 REF: 5-1 NAT: Analytic
LOC: Elasticity TOP: Price elasticity of demand MSC: Interpretive
5. In general, demand curves for luxuries tend to be price elastic.
ANS: T DIF: 1 REF: 5-1 NAT: Analytic
LOC: Elasticity TOP: Price elasticity of demand MSC: Interpretive
6. Necessities tend to have inelastic demands, whereas luxuries have elastic demands.
ANS: T DIF: 2 REF: 5-1 NAT: Analytic
LOC: Elasticity TOP: Price elasticity of demand MSC: Interpretive
7. Goods with close substitutes tend to have more elastic demands than do goods without close substitutes. ANS: T DIF: 2 REF: 5-1 NAT: Analytic
LOC: Elasticity TOP: Price elasticity of demand MSC: Interpretive
8. The demand for Rice Krispies is more elastic than the demand for cereal in general.
ANS: T DIF: 2 REF: 5-1 NAT: Analytic
LOC: Elasticity TOP: Price elasticity of demand MSC: Interpretive
9. The demand for soap is more elastic than the demand for Dove soap.
ANS: F DIF: 2 REF: 5-1 NAT: Analytic
LOC: Elasticity TOP: Price elasticity of demand MSC: Interpretive
10. The demand for gasoline will respond more to a change in price over a period of five weeks than over a period
of five years.
ANS: F DIF: 2 REF: 5-1 NAT: Analytic
LOC: Elasticity TOP: Price elasticity of demand MSC: Interpretive
11. Even the demand for a necessity such as gasoline will respond to a change in price, especially over a longer
time horizon.
ANS: T DIF: 2 REF: 5-1 NAT: Analytic
LOC: Elasticity TOP: Price elasticity of demand MSC: Interpretive
12. The price elasticity of demand is defined as the percentage change in quantity demanded divided by the
percentage change in price.
ANS: T DIF: 1 REF: 5-1 NAT: Analytic
LOC: Elasticity TOP: Price elasticity of demand MSC: Definitional
13. The price elasticity of demand is defined as the percentage change in price divided by the percentage change
in quantity demanded.
ANS: F DIF: 1 REF: 5-1 NAT: Analytic
LOC: Elasticity TOP: Price elasticity of demand MSC: Definitional
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